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This step comes in the wake of increasing acquisitions of homegrown companies by foreign players and was decided at a meet on Friday chaired by the Indian Prime Minister Manmohan Singh.
Concerns were raised in the Friday meet about foreign firms changing product mix from generics to patented ones after acquiring Indian companies, which could impact the cheapest price generic for the Indian population.
“Also, there is a concern that dominant MNCs can block small domestic companies from establishing their presence in the global market,” an official who attended the meet said.
India’s Commerce and Industry Ministry said it would soon start a review process to address “dangers inherent” in the current model of FDI in the sector.
“There are some concerns, particularly with regard to oncology, injectibles and vaccines, where we see there is a critical need which must be met at all cost and that the policy will ensure,” Commerce Minister Anand Sharma said in New Delhi.
The government may look at reducing the current 100 per cent FDI cap in the sector.
The ministry has said that the current FDI policy needs to be changed in order to ensure affordable drugs for Indians.
“Multi-national companies (MNCs) which are acquiring domestic firms have spent less than one per cent of their total sales in R&D in India. They are doing only clinical trials in India and not actual drug development work,” a senior official at the Commerce ministry added.
There has been increasing concern in India that foreign pharmaceutical firms have been lobbying to dilute local patent laws citing hindrance to drug research.
Local companies and health activists, however, have been opposing any such dilution saying it would make drugs costlier.
India’s Intellectual Property Appellate Board (IPAB) has revoked a patent granted to British drug giant GlaxoSmithKline (GSK) for its breast cancer drug Tykerbon earlier this month.
India’s top court had also dismissed Swiss drug maker Novartis AG’s plea to win an Indian patent for its anti-cancer drug Glivec in April.
Indian drug giants such as Cipla which produce cheaper generic versions of the drug Glivec at a fraction of the cost at which Novartis was pricing it, tend to gain from the ruling.
With inputs from Agencies